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Utility Maximization

Module. Micro: Econ:. 15. 51. Utility Maximization. KRUGMAN'S MICROECONOMICS for AP*. Margaret Ray and David Anderson. What you will learn in this Module :. How consumers make choices about the purchase of goods and services Why a consumer’s goal is to maximizing utility

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Utility Maximization

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  1. Module Micro: Econ: 15 51 Utility Maximization • KRUGMAN'S • MICROECONOMICS for AP* Margaret Ray and David Anderson

  2. What you will learnin thisModule: • How consumers make choices about the purchase of goods and services • Why a consumer’s goal is to maximizing utility • Why the principle of diminishing marginal utility applies to the consumption of most goods and services • How to use marginal analysis to find the optimal consumption bundle

  3. Maximizing utility In the Theory of Consumer Choice, consumers’ goal is to maximize their utility.

  4. Utility • Utility: a measure of the satisfaction the consumer derives from consumption of goods and services. • Utility and Consumption • The principle of diminishing marginal utility

  5. Budgets Good Y B C A • The budget line • The optimal consumption bundle Good X

  6. Spending the Marginal Dollar • Marginal utility • MU per dollar • Optimal consumption

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